Obama and Senate Republicans bicker over stimulus

February 7, 2009 7:56:56 PM PST

By ANDREW TAYLOR and PHILIP ELLIOTT Associated Press Writers

WASHINGTON (AP) - February 7, 2009 --

President Barack Obama and Senate Republicans bickered Saturday over his historically huge economic recovery plan after states and schools lost tens of billions of dollars in a late-night bargain to save it. The $827 billion measure is on track to pass the Senate on Tuesday despite stiff opposition from the GOP and disappointment among Democrats, including the new president who labeled it imperfect. Next up: Difficult negotiations between the House and Senate, which are divided over spending for tax cuts, education and aid for local governments.

"We can't afford to make perfect the enemy of the absolutely necessary," Obama said in his weekly radio and Internet address, sounding a note of pragmatism that liberal followers rarely heard on the campaign trail.

Still, the popular president - six in 10 voters approve of his performance so far - scolded Republicans with a pointed reminder that Democrats, not Republicans, were victorious in November.

Hours later, the Senate convened a rare Saturday session to debate a compromise forged between GOP moderates and the White House on Friday, a rare burst of comity aimed at securing passage of the bill with a few Republican votes joining the Democratic majority.

The compromise reached between a handful of GOP moderates led Susan Collins of Maine, the White House and its Senate allies stripped $108 billion in spending from Obama's plan, including cutbacks in projects that likely would give the economy a quick lift, like $40 billion in aid to state governments for education and other programs.

Yet it retained items that also probably won't help the economy much, such as $650 million to help people without cable receive digital signals through their old-fashioned televisions or $1 billion to fix problems with the 2010 Census.

Among the most difficult cuts for the White House and its liberal allies to accept was the elimination of $40 billion in aid to states, money that economists say is a relatively efficient way to pump up the economy by preventing layoffs, cuts in services or tax increases.

"It reduces a number of highly stimulative items like state fiscal relief ... and largely substitute for it some large tax cuts that are highly ineffective as stimulus," said Bob Greenstein, founder of the liberal Center on Budget and Policy Priorities. "So your net result is a bill that gets significantly less bang for the buck."

For all the talk of cuts, the bill retains the core of Obama's plan, designed to ease the worst economic recession in generations by combining hundreds of billions of dollars in spending to boost consumption by the public sector with tax cuts designed to increase consumer spending.

Negotiators left in the package $70 billion to address the alternative minimum tax to make sure families wouldn't be socked with unexpected tax increases averaging $2,300 or so. The problem was going to be fixed later in the year anyway, and congressional economists say fixing the AMT problem helps the economy by surprisingly little.

While publicly supportive of the bill, White House officials and top Democrats said they were disappointed that so much money was cut, including almost $20 billion for construction and repair of schools and university facilities. Those funds would have supported many construction jobs.

The $827 billion package debated in the Senate on Saturday - down from a $937 billion or so version debated during the week - included Obama's signature tax cut of up to $1,000 for working couples. Also included is a tax credit of up to $15,000 for homebuyers and smaller breaks for people buying new cars.

Much of the new spending would be for victims of the recession, in the form of extending unemployment insurance through the end of the year and increasing benefits by $25 a week, free or subsidized health care, and increased food stamp payments.

Obama himself acknowledged that the bill was far from perfect but said it would be too dangerous to leave it lifeless on the table.

"In the midst of our greatest economic crisis since the Great Depression, the American people were hoping that Congress would begin to confront the great challenges we face," Obama said in the address, released before he made his first trip to Camp David, the presidential retreat in the Maryland mountains.

"That was, after all, what last November's election was all about," he said.

Obama made an aggressive push for House and Senate lawmakers to work quickly to resolve their differences. The White House plans a major public relations blitz: A prime-time news conference Monday, several trips outside Washington next week and an address to a joint session of Congress later this month.

Treasury Secretary Timothy Geithner also planned to announce the details of a separate financial stability package on Tuesday, structuring how the administration would use another $350 billion in emergency relief approved last year to prop up the nation's banks on the brink of failure, a senior administration official said Saturday evening.

The official spoke on the condition of anonymity to discuss private administration planning. The announcement had been pushed back from Monday, when Obama plans to pitch his economic plan.

Lawmakers were already looking ahead to House and Senate talks where a handful of GOP moderates such as Collins and Arlen Specter of Pennsylvania - whose votes are crucial to pass the bill - seemed to have the upper hand against House Democrats unhappy with changes such as curbing increases for early childhood education and subsidies to bring the Internet to rural areas.

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AP White House Correspondent Jennifer Loven contributed to this report.